Justia Insurance Law Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
Canter v. AT&T Umbrella Benefit Plan No.3
Canter worked as a premises technician, installing wires, lifting heavy loads, and climbing tall ladders. After he began to suffer from severe migraines, lightheadedness, and dizziness, Canter concluded that he no longer could perform that work. He applied for short-term disability benefits in February 2017 through an AT&T plan. The plan administrator granted benefits for a few months, but AT&T terminated benefits after an independent medical reviewer concluded that Canter’s medical tests were normal and that his symptoms had improved. After Canter unsuccessfully appealed this decision using AT&T’s internal processes, he sued under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. 1132.The district court granted the defendants summary judgment in favor of the defendants. The Seventh Circuit affirmed the decision but reversed the court’s award of $181 in pro hac vice fees to the defendants as not taxable “costs” under 28 U.S.C. 1920. Extensive medical testing consistently yielded normal results, even though the medical providers and reviewers thought that a significant problem would have shown up in one or more concrete, physiological ways. Canter himself reported that he was experiencing improvement. View "Canter v. AT&T Umbrella Benefit Plan No.3" on Justia Law
Legend’s Creek Homeowners Associaton, Inc. v. Travelers Indemnity Co. of America
In September 2016, Legend’s Creek filed a claim with Travelers for hail and wind damage that had occurred in May 2016 to the north-facing sides of insured condominium buildings. Legend’s Creek retained Kassen to negotiate the claim with Travelers’ agent Knopp. The two initially agreed to repair the north-facing sides of the buildings. Travelers issued a $644,674.87 check. In January 2017, Kassen informed Knopp that the repairs were unacceptable. Travelers investigated and submitted additional checks of $238,766.88 and $28,438.02. Kassen told Knopp that the north-facing sides had to be completely replaced. Travelers agreed and, in February 2018, submitted an estimate. Less than three weeks before the contractual deadline to file suit Kassen demanded the replacement of all sides of the buildings because the new sides did not match to his satisfaction the undamaged ones. Knopp informed Kassen that Travelers would only replace the damaged north-facing sides and paint them to match.Legend’s Creek sued, alleging breach of contract and bad faith. Travelers argued that the lawsuit was brought outside the two-year contractual window and later moved to compel Travelers to submit to an appraisal. The magistrate compelled an appraisal for discovery purposes. The appraiser granted an “award” to Legend’s Creek based on the mismatched sides. The district court granted Travelers summary judgment. The Seventh Circuit affirmed, citing the limitations clause and rejecting claims of waiver. View "Legend's Creek Homeowners Associaton, Inc. v. Travelers Indemnity Co. of America" on Justia Law
Illinois Insurance Guaranty Fund v. Becerra
Illinois Insurance Guaranty Fund is a state-created insolvency insurer; when a member insurer becomes insolvent, the Fund pays covered claims. In cases involving insolvent health insurance, many claims are for patients who are eligible for both Medicare benefits and private health insurance. The Fund sought a determination that it is not subject to reporting requirements under section 111 of the 2007 Medicare, Medicaid, and SCHIP Extension Act, 42 U.S.C. 1395y(b)(7) & (b)(8), which is intended to cut Medicare spending by placing financial responsibility for medical costs with available primary plans first. Because time may be of the essence in medical treatment, the government may make conditionally cover medical expenses for Medicare beneficiaries insured by a primary plan, subject to later reimbursement from a primary plan. Section 111 imposes reporting requirements so that the government can identify the primary plan responsible for payment. The Fund believes that it is not an “applicable plan.”The district court dismissed for lack of subject-matter jurisdiction, reasoning the government had not made a final decision through its administrative processes. The Seventh Circuit affirmed. The Fund can obtain judicial review of its claim in a federal court only by channeling its appeal through the administrative process provided under 42 U.S.C. 405(g). The usually-waivable defense of failure to exhaust administrative remedies is a jurisdictional bar here. View "Illinois Insurance Guaranty Fund v. Becerra" on Justia Law
Liberty Mutual Fire Insurance Co. v. Clayton
Glick, without a written agreement, provided home daycare for Clayton’s infant daughter, Kenzi, for $25 per day, paid in cash at the end of the week. On January 29, 2018, Kenzi died while in Glick’s care. The coroner’s office indicated that her death resulted from bedding asphyxia after being placed prone on a couch cushion covered with a blanket to nap. The Glicks’ Liberty Mutual insurance policy, covered personal liability for “bodily injury” except for liability “[a]rising out of or in connection with a ‘business’ engaged in by an insured.” A separate endorsement stated: If an “insured” regularly provides home daycare services to a person or persons other than “insureds” and receives monetary or other compensation for such services, that enterprise is a “business.” Mutual exchange of home daycare services, however, is not considered compensation. The rendering of home daycare services by an “insured” to a relative of an “insured” is not considered a “business.”Liberty Mutual denied coverage. In Clayton’s wrongful death lawsuit, the district court granted Liberty Mutual summary judgment and expressly declared Liberty Mutual has no duty to defend or indemnify Glick in the underlying lawsuit. The Seventh Circuit affirmed, stating that Clayton’s claim “did not even potentially fall within the scope of coverage.” View "Liberty Mutual Fire Insurance Co. v. Clayton" on Justia Law
Paradigm Care & Enrichment Center, L.L.C. v. West Bend Mutual Insurance Co.
In March 2020, to prevent the spread of Covid-19, Illinois Governor Pritzker ordered all persons living in the state to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum basic operations. Childcare providers were permitted to continue operating only with an emergency license to care for the children of essential workers. Michigan’s Governor Whitmer issued a similar order. Both states lifted those restrictions by June 2020. West Bend denied claims by childcare centers under their all-risk commercial property insurance policies.The policies cover the actual loss of income and expense due to the suspension of an insured’s operations “caused by direct physical loss of or damage to property”. The loss or damage must be caused by “[d]irect physical loss.” Lost income and extra expenses are covered when a civil authority prohibits access to insured premises because of damage at nearby property. The policies cover income lost and expenses incurred when an insured’s operations are temporarily suspended by government order "due to an outbreak of a ‘communicable disease’ … at the insured premises.”The district court concluded that the Centers had not plausibly alleged that COVID-19 caused physical loss of or damage to their property—or to nearby property— or that government shutdown orders were due to an outbreak at their premises. The Seventh Circuit affirmed, noting that other circuits have reached the same conclusion. View "Paradigm Care & Enrichment Center, L.L.C. v. West Bend Mutual Insurance Co." on Justia Law
East Coast Entertainment of Durham, LLC v. Houston Casualty Co.
ECE's movie theaters lost money after North Carolina's Governor imposed statewide closures in response to COVID-19. ECE’s insurance policy with HCC provides: We will pay the actual loss of Business Income you sustain due to the necessary “suspension” of your “operations” during the “period of restoration.” The “suspension” must be caused by direct physical loss of or damage to property at premises that are described in the Declarations and for which a Business Income Limit of Insurance is shown in the Declarations. The loss or damages must be caused by or result from a Covered Cause of Loss. A “Civil Authority” provision covers “the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss.”After HCC denied ECE’s claim, the district court dismissed ECE’s suit. ECE argued that the policy covered losses due to COVID-related closures because the virus rendered ECE’s property unsafe. The Seventh Circuit affirmed the dismissal. ECE alleged neither a physical alteration to property nor an accessor use-deprivation so substantial as to constitute physical dispossession. View "East Coast Entertainment of Durham, LLC v. Houston Casualty Co." on Justia Law
USA Gymnastics v. Liberty Insurance Underwriter, Inc.
Larry Nassar sexually assaulted hundreds of girls and young women during his involvement with USA Gymnastics (USAG), the non-profit organization which governs the sport in the United States. As a result of Nassar’s abuse, USAG has been sued several times and investigated by Congress and federal and state authorities. USAG sought financial help with its defense from insurers, including Liberty, with which USAG had a claims-made, directors and officers (D&O) liability insurance policy. An insurance-coverage lawsuit in Indiana state court was removed to federal court.The Nassar-related litigation and investigations forced USAG into bankruptcy. The bankruptcy court issued proposed findings and conclusions, including that the Nassar-related claims were timely made and that a wrongful-conduct exclusion applied to only those claims for which Nassar was criminally convicted. The district court agreed.The Seventh Circuit remanded, first holding that it had jurisdiction because the ruling had the “practical effect” of an injunction under 28 U.S.C. 1292(a)(1). USAG’s claims were timely made during the policy period. The wrongful conduct exclusion, which the court found ambiguous as applied to this case, applies to 10 instances of Nassar’s sexual abuse, but not to claims related to his abuse that were not finally adjudicated. A bodily injury exclusion in the policy does not preclude coverage; coverage is proper for various government investigations and other matters. View "USA Gymnastics v. Liberty Insurance Underwriter, Inc." on Justia Law
Aluminum Trailer Co. v. Westchester Fire Insurance Co
ATC purchased a commercial general liability insurance policy from Westchester, which provided coverage against liability incurred because of “advertising,” a defined term that included trade dress infringement. BizBox sued ATC for breach of contract and interference with its business expectancies, alleging that ATC manufactured and sold a knock-off trailer using BizBox’s design. ATC sought a declaratory judgment that Westchester owed it a duty to defend and a duty to indemnify. Westchester argued that BizBox’s underlying suit was not covered under the insurance policy because BizBox did not allege, in that litigation, an infringement of its trade dress in ATC’s advertising.The Seventh Circuit affirmed the dismissal of the suit. BizBox’s complaint never alleged a trade dress infringement claim against ATC nor an advertising injury and could not be construed to plausibly allege a trade dress infringement claim against ATC. BizBox alleged no facts that can plausibly be construed to show that it asserted that an advertising injury occurred. Westchester, therefore, has no duty to defend or indemnify ATC under the “personal and advertising injury” provision of the Policy. View "Aluminum Trailer Co. v. Westchester Fire Insurance Co" on Justia Law
Mashallah, Inc v. West Bend Mutual Insurance Co.
Mashallah sells handcrafted jewelry at its Chicago store. Ranalli’s operates a bar and restaurant. Both purchased West Bend all-risk commercial property insurance policies. In March 2020, in response to the COVID-19 pandemic, Illinois Governor Pritzker ordered all individuals to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum operations. Restaurants were considered essential businesses and permitted to sell food solely for off-premises consumption. Ranalli’s was restricted to filling takeout and delivery orders. Mashallah was not classified as an essential business and had to cease its retail activities. Both businesses sustained heavy financial losses. Their West Bend policies are materially identical. West Bend agreed to pay for actual business income lost and necessary extra expenses incurred if they were caused by “direct physical loss of or damage to” the businesses’ properties. Both policies contain virus exclusions. West Bend denied their claims.The Seventh Circuit affirmed the dismissal of contract and bad faith claims and a claim that West Bend’s retention of full premiums—despite decreased risks occasioned by the reduction in insureds’ business operations—constituted unjust enrichment, requiring rebates. The virus exclusions barred coverage for the purported losses and expenses and the businesses failed to allege viable legal bases for rebate of premiums. View "Mashallah, Inc v. West Bend Mutual Insurance Co." on Justia Law
Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Co.
In March 2020, the Dallas County government issued orders restricting the operations of local businesses in light of the COVID-19 pandemic. Hotels were permitted to continue to provide lodging, and delivery and take-out food services, subject to social-distancing rules. Crescent owns the Dallas Ritz-Carlton hotel, which offers guest rooms, a restaurant and bar, general event space, a salon, spa, and fitness center. Crescent alleges that COVID-19 rendered the air in the hotel unsafe and diminished the functional space available, causing significant losses of income. Crescent also alleges that it incurred expenses to install plexiglass partitions and hand sanitizer stations, to display signs throughout the hotel, and to move furniture to permit social distancing. Crescent’s Zurich insurance policy requires “direct physical loss or damage” to covered property and includes an exclusion for losses attributable to any communicable disease, including viruses, and a microorganism exclusion, which bars coverage for losses “directly or indirectly arising out of or relating to mold, mildew, fungus, spores or other microorganisms of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health.”The Seventh Circuit affirmed the dismissal of Crescent’s suit against Zurich. The phrase “direct physical loss or damage” requires either “a permanent [dispossession] of the property due to a physical change … or physical injury to the property requiring repair.” The microorganism exclusion independently bars coverage for the hotel’s claimed losses. View "Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Co." on Justia Law